OT:RR:CTF:VS H326072 JMV
Lauren Wyszomierski
White & Case LLP
701 Thirteenth Street, NW
Washington, DC 2005-3807
RE: Country of Origin; Refrigerator Compressors; Section 301 Measures
Dear Ms. Wyszomierski,
This is in response to your letter, dated June 6, 2022, and supplemental letter dated February 1, 2023, on behalf of GMCC and Welling Appliance Component (Thailand) Co., Ltd. ("GAT"). In your letter, you request a binding ruling pursuant to 19 C.F.R. Part 177 on the country of origin for purposes of the Section 301 measures of a refrigerator compressor that will be imported from Thailand.
You have asked that certain information submitted in connection with this ruling request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. 177.2(b)(7), the request for confidentiality is approved. The information contained within brackets and all attachments to this ruling request, forwarded to our office, will not be released to the public and will be withheld from published versions of this decision.
FACTS:
The product at issue is the H series refrigerator compressor, which is sold to home appliance manufacturers for installation in refrigerators and freezers. This compressor is a reciprocating hermetic compressor, which uses pistons driven by a crankshaft to increase the pressure of a gas by decreasing volume.[1] The compressor consists of six major subassemblies: case A andcase B assembly (which together make up the exterior shell of the compressor), a transmission, a crankcase, a suction-discharge assembly, and a motor. You state that the refrigerator compressor is classified under subheading 8414.30.40 of the Harmonized Tariff Schedule of the United States ("HTSUS").
In your initial request, you present two manufacturing scenarios. In each scenario, the compressor is assembled in Thailand from components of Chinese and Thai origin with oil from Japan. However, under scenario two the motor rotor is subjected to additional processing in Thailand. You also provided a supplemental request asking us to consider a third manufacturing scenario that differentiates from the first only in that the motor stator is subjected to additional processing in Thailand.
In all scenarios, the components of Thai origin are the case A and B assemblies, the transmission shaft, and the crankcase. The case A and B assemblies create the outer housings of the compressor. To create each case, a steel coil is fed into a die and is then stretched, formed, trimmed, flanged, and punched. Waste material is removed, and the housing is rinsed and dried. Finally, a base support; Chinese suction, process, and discharge pipes; a Chinese terminal; and a Chinese terminal box are welded to the case A assembly.
The transmission shaft assembly process begins in Thailand by pouring and smelting materials into a mold. The molded shaft is cooled, cleaned, drilled, grinded, and brushed to final measurements. The shaft is then subjected to a phosphating process. The crankcase is sourced from Thailand and further processed by honing and brushing the cylinder hole in which the shaft will be inserted. Afterwards, the crankcase is cleaned and dried.
Additional Chinese components are subject to further processing in Thailand prior to the final assembly. The outer circle of the Chinese piston is subjected to grinding, brushing, and phosphating processes, before it is baked in a furnace, brushed, and subjected to an ultrasonic cleaning. The Chinese manufactured rod is subjected to ultrasonic cleaning, then matched to a corresponding piston-pin. The Chinese valve plate is subjected to ultrasonic cleaning then assembled to the discharge valve and Chinese stopper. A riveting place is then pressed onto the riveting point of the valve plate and a muffler cover is curved into place. Chinese lower and upper balance weights and rivets are assembled to the shaft. The Chinese pump assembly is then riveted to the shaft with balance weights, which is then frame mounted.
The assembly for all three scenarios occurs in Thailand and begins by installing and pre-tightening the cover A assembly and cover A bolt. The air blowing and suction ports are aligned with the applicable crankcase bores. The corresponding piston is then placed into the cylinder hole of the crankcase. Afterwards, a bearing assembly and the Chinese shaft, which were previously connected to the Chinese pump assembly, are inserted into the shaft hole. Next, the corresponding connecting rod piston pin is inserted into the ends of the connecting rod and the ends of the shaft. The piston pin hole is aligned with the spring pin hole of the piston and a spring pin is inserted then compressed. The valve P packing from China is installed on the crankcase and the cylinder cover is bolted into place. The suction muffler, cover packing, valve assembly and Chinese suction valve are then installed, which creates the suction-discharge assembly. The components are tightened and afterwards, the pump body is rotated.
For scenario two, the rotor is subject to additional processing in Thailand. Specifically, a steel Chinese rotor core is blued, then placed in a die-casting mold. Molten aluminum is poured into cavities of the steel rotor as it is a better conductor of electricity. Afterwards, the inner bore is manually formed, the outside diameter is cut, and the rotor subassembly is returned to the bluing furnace. In scenarios one and three, the Chinese rotor core is not subject to any of the steps described in scenario two.
Under the third scenario, the rotor assembly is sourced from China, but the stator undergoes additional processing in Thailand. Specifically, stator laminates from China are stacked, then bound by an insulating insert, which is fed through a machine into the center of the stacked stator laminates. However, the insulating insert alone does not keep the laminates together. The stator laminates are then wound with enamel wire, which in addition to the insulating insert, keeps the stator laminates together. This wound enamel coil is machine shaped and now makes up the main coil. Then an additional interlayer insulation is inserted. An auxiliary coil of enamel wire is wound, shaped, then connected to the coil by terminal crimping. The terminal is covered with heat-shrunk insulating sleeves and buried in the wire package. The coil is shaped again before tying the wire package. An inner and outer insulation film are added for protection and the coil is shaped a final time. Then a roller polishing tool is used to grind the inner surface of the stator and another tooling to shape the wedge. The stator then undergoes visual inspection and testing. In scenarios one and two, the Chinese stator is not subject to any of the steps described in scenario three.
The assembly process for all scenarios continues in Thailand with the assembly of the motor, which starts with the rotor being heated, aligned, and installed to the shaft. Afterwards, the shaft is cooled and bolted into place. The stator is then bolted into place and secured with the bolt assembly. Subsequently, a stator ring is installed, a protective cover is placed over the stator coil and a gap piece is rotated. Next, spring bushes from China are installed into the case A assembly. The motor and pump assembly are then installed into the case assembly. Afterwards, one end of the muffler, case B assembly is installed onto the discharge pipe A assembly and the other end on the muffler packing. The muffler cover is bolted and soldered to discharge pipe A. Later, the compressor is sealed by welding the case B assembly to the case A assembly. Upon completion, each compressor is labeled and painted.
ISSUE:
What is the country of origin of the refrigerator compressors for the purposes of applying Section 301 trade remedies?
LAW AND ANALYSIS:
The United States Trade Representative ("USTR") has determined that an additional ad valorem duty of 25 percent will be imposed on certain Chinese imports pursuant to its authority under Section 301(b) of the Trade Act of 1974 ("Section 301 measures"). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20(b), HTSUS. Among the subheadings listed in U.S. Note 20(b) of Subchapter III, Chapter 99, HTSUS, is 8414.30.40, HTSUS. When determining the country of origin for purposes of applying current trade remedies under Section 301, the substantial transformation analysis is applicable.
The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character, or use, different from that possessed by the article prior to processing. See Texas Instruments, Inc. v. United States, 69 C.C.P.A. 151 (1982). The substantial transformation determination is based on the totality of the evidence. See Nat'l Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993). CBP considers factors such as the nature of the operation (including the number of components assembled) and the number of different operations involved. See C.S.D. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51 & C.S.D. 90-97.
In Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade ("CIT") interpreted the meaning of "substantial transformation" as used in the Trade Agreements Act of 1979 ("TAA") for purposes of government procurement. Energizer involved the determination of the country of origin of a flashlight, referred to as the Generation II flashlight, under the TAA. All the components of the Generation II flashlight were of Chinese origin, except for a white LED and a hydrogen getter. The components were imported into the United States where they were assembled into the finished Generation II flashlight. The court reviewed the "name, character and use" test in determining whether a substantial transformation had occurred and reviewed various court decisions involving substantial transformation determinations. The court noted, citing Uniroyal, Inc. v. United States, that when "the post-importation processing consists of assembly, courts have been reluctant to find a change in character, particularly when the imported articles do not undergo a physical change." Energizer at 1318. In addition, the court noted that "when the end-use was pre-determined at the time of importation, courts have generally not found a change in use." Energizer at 1319, citing as an example, National Hand Tool Corp. v. United States, 16 C.I.T. 308, 310, aff'd 989 F.2d 1201 (Fed. Cir. 1993). Furthermore, courts have considered the nature of the assembly, i.e., whether it is a simple assembly or more complex, such that individual parts lose their separate identities and become integral parts of a new article.
CBP's general position is that the country of origin of an electric motor will be determined by where the two most essential components of an electric motor, the rotor and the stator, are made. In turn, the country of origin of the stator and rotor will often be based upon the country where the cores of these components are made. In New York Ruling Letter ("NY") N305251, August 1, 2019, CBP considered the origin of an electric stepper motor under three manufacturing scenarios. In the first scenario, the stator and the rotor were manufactured in Japan by stamping the steel slits from coils that were then pressed into a stator and rotor stack. The balance of the stepper motor components (the pulley, the bearing, the shaft, the end caps, etc.) were sourced from China. The assembly of the stepper motor components into a functional motor was also performed in China through operations such as machining the stator and rotor, painting, winding of the wire, affixing the shaft and bearing onto the rotor, soldering the wire onto the connector board, screwing the housing and endcaps together, etc. CBP found that the stator and rotor performed the critical function of the finished stepper motor and were not substantially changed by the assembly of the remaining motor components. CBP held that the assembly operations were not complex enough to transform the stator and rotor into a new article and, therefore, the country of origin of the electric stepper motor was Japan, where the stator and rotor stack were produced.
NY N305251 is similar to the first scenario in this instant case, as all major components are produced in China, including the rotor and stator. In the first scenario, the assembly of the compressor consists of assembling parts of largely Chinese origin. Therefore, we find the country of origin of the compressors to be China under the first scenario.
With regard to motors, the extent of processing that occurs after the stator and rotor core are created must also be taken into account. For example, in NY N309707, dated March 11, 2020, CBP considered the origin of a fan blower. The fan blower was produced in Mexico from parts of largely Chinese origin. The parts that came from China were a stator core, magnetic wire, insulator sheets, bottom housing, a lead wire harness, a rotor shaft, bearing housing, ball bearings, and rotor yoke. In Mexico, workers created the stator subassembly by winding the magnetic wire onto a stator core. The printed circuit board assembly ("PCBA") and the Chinese insulator sheets were then connected and soldered onto the stator assembly. The stator assembly was then installed and bonded to the Chinese bottom housing. A lead wire harness from China was then soldered to the contacts of the PCBA assembly and a Japanese seal was installed in the bottom housing. Workers then created the rotor assembly by installing a retaining ring on a Chinese shaft to form a shaft assembly. Washers from Mexico or the United States were then installed onto the shaft and ball bearings were bonded to bearing housings and the shaft. The magnet was then assembled and bonded to the rotor yoke with adhesive. The magnetic yoke assembly was then cured, magnetized, and bonded to the rotor assembly. The Chinese impeller was then bonded onto the rotor assembly, which in turn was fastened to the stator assembly. A Chinese top housing was fitted and screwed onto the impeller attached to the completed rotor and stator assemblies. Unlike in NY N305251, CBP found that the various manufacturing and assembly processes in Mexico, beyond the creation of the rotor and stator core, created a new and different article of commerce. The air circulating and motor components of each unit, to include the less significant Chinese and Japanese components, were subjected to operations resulting in the individual parts losing their separate identities to become a new article, i.e., a fan blower assembly that consisted of an impeller and a motor.
In NY N308827, dated January 21, 2020, the country of origin of three electric motors was under consideration. The stator assembly was comprised of the wound stator core and the stator housing. The rotor assembly was comprised of the laminated stack, aluminum, and the flanges. The wound stator core and rotor lamination stacks were manufactured in China, while the stator housing and flanges were sourced from France. In Hungary, the rotor lamination stack was injected with molten aluminum. In addition, a Hungarian origin shaft was inserted, and the rotor mass was machined and balanced. Once the rotor was fabricated, the motor was constructed, including inserting the stator core into the housing to form a stator assembly; attaching the flanges to the rotor to form a rotor assembly; inserting the rotor assembly into the stator assembly; making electrical connections; and testing, painting, and packaging. Regarding the origin of the motors, it was noted that the assembly operations which consisted of placing the rotor and stator assemblies into a housing to produce a functioning electric motor was not a complex operation. Further, the ruling explained that no single subassembly described was dispositive in determining the essence of a fully assembled electric motor because the rotor assembly and the stator assembly merited equal consideration. Accordingly, the country of origin of the motors was Hungary, as the manufacture and assembly included, in part, some of the rotor production in Hungary.
We find that the processing of the motor in scenario two of the case at hand to be very similar to the processing in NY N308827. In both cases, a rotor core is injected with molten aluminum to create the rotor assembly, which is then assembled with a stator and other parts to create the motor. Additionally, in the instant case, there is additional processing completed in Thailand to create the final refrigerator compressor. The additional production of the rotor in Thailand makes the processing in scenario two a more complicated procedure that is more than simple assembly. Because of the extensive operations that take place in Thailand to create the motor and then compressor, we find the country of origin of the refrigerator compressor to be Thailand under scenario two.
Regarding scenario three, In NY N316151 dated December 18, 2020, CBP considered a product known as the Shaded Pole Synchronous AC Motor. The motor consisted of three subassemblies that were identified as the bobbin coil subassembly, the stator subassembly, and the rotor subassembly. The rotor was Chinese origin, and the bobbin coil assembly was Mexican origin. The stator subassembly was also produced in Mexico by stamping individual laminations from slitted silicon steel sheet, stacking, and pressing the laminations to form a stator stack and a yoke stack. The two lamination stacks were joined together with the bobbin coil subassembly and machine pressed, then annealed copper wire was wrapped around the laminations to form a shaded coil for the stator. Again, because some of the production of the motor included making the stator in Mexico, CBP found that the manufacturing and assembly operations, in sum, resulted in the motor being a product of Mexico. Significantly, the ruling pointed out that the rotor and stator were the dominant components of a finished electric motor. Similarly, in scenario three of this case, the laminates are combined to create the stator core, bound, then wound with enameled wire. The wire woundings are then shaped, insulated, and reshaped and tied. The inner surface of the stator is then ground, and the final stator is tested and inspected. The stator is then assembled into the motor, which is then incorporated into the final compressor. Although the laminates are not stamped in Thailand as they are in NY N316151, the motor undergoes additional processing to create the refrigerator compressor. Therefore, we find the country of origin of the compressor in scenario three to be Thailand.
HOLDING:
On the basis of the information submitted, we find the origin of the refrigerator compressor under scenario one to be China for purposes of Section 301. However, we find the origin of the refrigerator compressor under scenarios two and three to be Thailand for purposes of Section 301.
Please note that 19 C.F.R. 177.9(b)(1) provides that "[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by [CBP] field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based."
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika Brenner, Chief
Valuation and Special Programs Branch
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[1] Ioan Sarbu & Calin Sebarchievici, Ground-Source Heat Pumps: Fundamentals, Experiments and Applications 47 (Academic Press, 2015).